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Department of Economics, Norwegian School of Economics (NHH) Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)

No 21/2016:
Price Changes - Stickiness and Internal Coordination in Multiproduct Firms.

Wilko Letterie () and Řivind A. Nilsen ()

Abstract: We assess empirically the micro-foundations of producers’ sticky pricing behaviour. We account for various functional forms of menu costs. The focus is on the analysis of multiproduct plants, and the menu costs therefore also allow for economies of scope. The structural model developed is tested using monthly product- and plant-specific producer prices for Norwegian plants. We find evidence of linear and fixed menu costs that account for inaction of price adjustment. Convex menu costs are statistically significant but of moderate importance. Finally, our estimates suggest economies of scope in adjusting prices resulting in (incomplete) synchronization of price changes.

Keywords: Price Setting; Micro Data; Multiproduct Firms; (follow links to similar papers)

JEL-Codes: E30; E31; (follow links to similar papers)

38 pages, December 23, 2016

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